Overview of the reforms introduced by the ECCT Act

The Economic Crime and Corporate Transparency Act 2023 (ECCT Act), first laid in Parliament in September 2022, received Royal Assent on 26 October 2023. The ECCT Act contains, among other things, draft amendments to the Companies Act 2006 to facilitate the transformation of Companies House. Its provisions will come into force at a later date to give companies, and Companies House, the chance to prepare.

The passing of the ECCT Act follows consultations in 2019 and 2020, the white paper containing the Government's final plans for reform published in February 2022 and the laying of the draft bill in September 2022 (you can read more on the background to the ECCT Act on our blog here). A number of significant amendments were made to the bill as it moved through the parliamentary process.

We have released a series of snapshotscovering the different aspects of the reforms, and are hosting two webinars on the ECCT Act (see below to register), to help companies prepare for the significant changes ahead:

  • The transformation of Companies House– The ECCT Act will result in the biggest change in the role of Companies House since it was created in 1884, turning it from a largely passive recipient of information to a much more active gatekeeper. Under the new Companies Act provisions inserted by the ECCT Act, Companies House will be given the power to query any filings, to request further evidence and/or to reject any filings, and to remove material from the register more swiftly. It will also be able to require all information to be filed electronically.
  • Identity verification– Identity verification requirements will be introduced for all new and existing company directors (and equivalents for other entities), people with significant control (PSCs) and those filing information with Companies House. UK company formation agents that register with Companies House will be able to conduct these identity checks. Directors and PSCs who do not verify their ID will commit a criminal offence and/or incur a civil penalty. Companies that have an unverified director will also commit an offence.
  • Miscellaneous company administration changes– The ECCT Act makes a number of changes to the administration of companies, designed to reduce compliance burdens and improve the quality of the information on the register.
  • Limited partnerships – The ECCT Act also contains provisions introducing registration and transparency requirements for limited partnerships. The changes follow reforms proposed in April 2018 by the Government to UK limited partnership law to strengthen the legal framework and limit the risk of limited partnerships being used for illicit activities (see our corporate update 2018/9).
  • Corporate criminal liability for economic crimes – The Government has used the ECCT Act to introduce a new strict liability corporate offence of failure to prevent fraud, and to amend the so-called 'identification doctrine' (where companies can be held criminally liable when the mental state of their 'directing mind and will' can be attributed to the company concerned) for economic crimes.

In its February 2022 white paper, the Government committed to commencing the ban on corporate directors (which was inserted into the Companies Act by the Small Business, Enterprise and Employment Act 2015 ). It is anticipated that this prohibition will be brought into force by one of the commencement orders under the ECCT Act, which will also provide for a principles-based exception. For more details, see our snapshot here.

Timing for implementation of the reforms

As noted above, the provisions of the ECCT Act will come into force at a later date to allow companies and Companies House time to prepare for implementation. In a blog post on the ECCT Act receiving Royal Assent, Companies House noted that whilst some of the measures in the ECCT Act will need processes to be developed and secondary legislation before they can be brought into force, other measures can be brought into force sooner. These early-implementation measures include the power for Companies House to query or reject information filed with it, the revised company names regime and the requirements for companies to provide the registrar with an email address. Companies House anticipates that these early-implementation measures will come into force in "early 2024".

ECCT Act webinars

We will be holding two webinars on the ECCT Act; join us on:

  • Tuesday 28 November, 9.30-10.15am, to hear some of our company law experts talk through the implications for companies of the transformation of Companies House – click here to register; and
  • Thursday 7 December, 9.30-10.15 am, to hear some of our corporate criminal liability experts explain what companies can do now to prepare for the new criminal offences – click here to register.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.